Peter Hunt analyses
market statistics for the year to 31 August.
Go deeper with GlobalData
Monthly new
business volumes written by FLA members in August present again an
unclear, possibly transitional picture, as the market struggles to
move from decline into growth. After 19% growth in June then an 8%
fall in July, business finance volumes (excluding big ticket) were
exactly level with the same period last year. Underlying this
growth, business car finance was down 9% while other assets
presented a 5% volume increase.
Big ticket transactions over
£20m (€22.5m) hit a new low, with only £46m of new business
recorded. The comparison with previous years shows the scale of the
decline: In the three Augusts 2007-2009 the market wrote £463m,
£614m and £236m respectively. In the 12 months to end of August
2010, big ticket volumes fell to £1.9bn. This is 70% below the peak
of £6.4bn in the 12 months to end November 2008.
Across business and consumer,
motor finance in August was up 4.6% despite registrations being
down 18% on 2009. Penetration of consumer registrations appears
strong, with finance volumes down 2.6% but registrations down 38%
(overall growth in consumer car finance was driven by finance of
used cars, up 22% on 2009). August is historically a low month for
new registrations, being followed by the new ‘60’ plate in
September which should result in a better month for motor
financiers (albeit registration volumes are forecast by SMMT to
remain subdued to the year end).
Within the business finance
markets, with the exception of cars (at least for the time being,
with the last two months having been negative) and business
equipment, finance volumes (as shown by a three-month rolling
average) continue to lag 2009 volumes. Some positive signs exist.
Truck and van registrations showed good annual growth in August,
reflected by a growth in finance volumes. Plant and machinery has
shown annual financing growth in four of the past five months. IT
equipment also showed growth in August
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By GlobalDataWithin the business finance
markets, with the exception of cars (at least for the time being,
with the last two months having been negative) and business
equipment, finance volumes (as shown by a three-month rolling
average) continue to lag 2009 volumes. Some positive signs exist.
Truck and van registrations showed good annual growth in August,
reflected by a growth in finance volumes. Plant and machinery has
shown annual financing growth in four of the past five months. IT
equipment also showed growth in August. On the other hand, aircraft
ships and rolling stock volumes reached on £25m, a new
low.
Information regarding
distribution channels appears equally inconclusive. After good
growth in July, sales finance delivered a weaker performance in
August. Broker-introduced volumes held up well, apparently
reflecting comments made by lessors serving this market that supply
is outstripping demand. However, assuming consistency of reporting
behaviours, comparison of their respective market shares over
recent years indicates a potential shift in finance
distribution.
The rise and rise of lease/hire
purchase appears to continue, up 24% on last year (while all other
product categories declined at 20%), reaching 47% of market volumes
in August.
Comment
Based on economic outlook and
sentiment, finance volumes look set to ‘bump along’ for some time
yet. Low new business volumes will lead to further reductions in
portfolio size. Finance companies may need to once again review
their scale-related operating efficiency and headcount levels and
seek competitor-based growth tactics (including
acquisition).
The author is a partner in
the consulting and services firm Invigors.
